Inside the Big Plan to Make Ethereum Go Mainstream

in the space. That has been replaced by Monnero as the currency of choice. Charlie Lee is the creator of a light coin, which is an alternative, a challenger to Bitcoin. Right now, several of these currencies are facing a curious problem. They become too popular for their own good. They weren't originally designed to support so many users, and their networks are struggling to keep up with all the new people

flooding in. Nowhere is this problem more acute than in the clogged networks of what's quickly become the world's number two cryptocurrency. The currency is called Ether, and the network that powers it is called ethereum. Either's boom is meant that its network has been bogged down by long delays, which means that many of its users already desperate for an overhaul. Leading the charge as a young guy I recently met at an Ethereum conference in Cancoon. His name

Vlad Zampier. Hey everyone, how's it going? Do you have a The thing is, if Atherorum were run by a corporation, there'd be a CEO who could sign off on the change, And if a theory were run by a central bank, it would be just a handful of central bankers who deliberate and vote yes or no. But Ethereum is run by neither of those things. Just like many of its other cryptocurrency siblings, including the Bitcoin, Ethereum was created with

this libertarian, anti corporate ideal of being leaderless. It's Vlad's job to navigate the chaos and that unstructured can unity to implement the change that he and so many others have been dreaming of for years. Hi, I'm Brad Stone and I'm Matthew Lising, and this week on Decrypted, we're taking you inside Lad's planned upgrade Etheroryum, and is hoped to pave the way for this new era of technology

to go mainstream. Glad has big dreams for Ethereum. He sees it as so much more than infrastructure for another currency. But to make all of that possible, he's got to get everyone to agree to his overhaul. So can Glad pull it off? Or will it prove too difficult to rally this huge community with competing interests that's spread out across the world. By the end of the episode, you might even understand what blockchains all about. Stay with us, So, Mad,

I'm a little jealous. You've got to go to Cancoon for the story I did, although I was stuck inside this conference hall with about two thousand Ethereum developers the whole time, and there was some bo involved. Okay, all right, I take it back. I'm not jealous. So this conference was where you met our protagonists of Lad. Tell me what he was like. So he's twenty seven years old. He has shoulder length hair that he plays with a lot. He tends to put it in his mouth as he's talking.

He's a huge fan of the Twisted cartoon Rick and Morty. He likes to snowboard in his off time. You know. He reminded me of Fred Armison of SNL and Portlandia fame. But there's another interesting thing. You know, he's got this very international background. I was born in Prussia for Romania. In Romania, yeah, okay, cool? Did you grow up there? Okay? And then then where'd you go? Canada? I grew up in Ottawa wasting. I noticed the wealth is something you list.

Are you do you living? Growth? I went to the university and golfer I live and growth for a number of years. Lad's parents now live in Switzerland, but Lad himself more or less doesn't really have a home. He's been so busy traveling from conference to conference that he's on the road full time. Lad has been interested in computers since he was a young boy. That's always been my thing. My grandfather was about professor. He taught me about Sin Sosa. Yeah. He says he got into programming

when he was eleven or twelve. I guess the first time I got into programming, I was playing around in the World Cup three map editor, making the custom games. And then we had this great environment where you could news drop down lists to program um events and all sorts of like actually incredibly complex um things. And soon enough that led to a passion for cryptocurrencies. At first, he was focused on bitcoin. I actually got into bitcoin, um in my I think, which was um the year after,

like in my first year of grade school. Um and uh, but I I kind of dropped out, not with the intention of going into cryptocurrency, but in like the following months that ended up being when I ended up doing. Now enter Batalic buterin a Russian Canadian boy genius programmer the years when lad got into bitcoin, And that's when Batalic created a new kind of cryptocurrency called ether, powered by a network he called ethereum. Metallic was only nineteen

at the time. And Matt, did you meet Metallic at this conference too? I did. I asked him how he came up with the name ethereum. I came up with it myself. Um, but we I and I remember myself reading as a list of elements from science fiction. Uh. And I remember liking ethereum because has this connection to this nineti century scientific theory of ether, this medium where a gift waterways travel through water, sound ways traveled through the air, like the hypothesis will be light We've traveled

through ether. I just love this name. It's it's geeky, it has a hat tip towards a history the sci fi connotations. It's kind of just perfect for a cryptocurrency. Yeah, and if you met this guy, he's almost like a walking computer. He's just incredibly, incredibly smart. So in the talk met Vlad at a bitcoin meet up in Toronto. The two soon started talking about the seeds of what

will become the project. The Lad would head up May It's play fourteen Italian thinking about it for a few months before that, he told me there's like, you know, future, and we kind of spent a bunch of time and May actually like it's like hashing things out. But at the point I was still skeptical, didn't really think it would work. But like in September, I became like, you know, convinced that it would work. Now in the niche, nerdy world of Ethereum, Vlad is nothing short of a celebrity.

I followed him around at the DevCon conference and people were hurling questions at him left and right as he walked down the hall. But the signature is, I mean, may not be enough. I mean it sounds like fun. Yeah, it's pretty hectic. But you know, even before he was scheduled to make his big speech about his project, people are jostling to talk to him. So this is the project that's going to unclogged the ethereum network. That's the hope.

He's named the project Casper because it's related to an earlier type of consensus system known as Ghost or ghost protocols with a friendly ghost correct by Construction Filtre. This is the introduction for lad rallying the crowd. There must have been about two thousand people in the conference hall and they were getting excited. But then he ran into a power Point Snaphew, as we all do, even math wonder kids struggle with power Point. You would have thought

they were chanting for a rock star. Really sorry, guys, but you know I swear to God's gonna happen and you'll be impress. So did it happen? Yeah, he eventually got it to work. And were you impressed with those ideas? Yeah? It was mostly a ton of crazy math that I didn't understand, but from what I could tell, it went very well. Part of Glad's job is to figure out the super complicated math behind his project, but another part is evangelizing the project itself, trying to get everyone to

come aboard, and that's a steep challenge. Just as the more technical problems he's trying to solve. Vlad is kind of like a politician. Yeah, he'd probably cringe at that, but it's true because then just his name veragely difficult and extraordinarily difficult systems from a distributed systems problem. What does that mean. That's a very technical way of saying that, just like our own messy democracy, it's really hard to

get a large group to all get behind Casper. I mean, these are people spread all around the world, most of whom don't know each other, So how would they actually implement lads change? Well, once lads done figuring out the math, then there are going to be these other developers who come in and turn lads math into code, and that code goes into an updated version of the software that people use to navigate the Ethereum universe. So then people

either decide to adopt that update or not. It's kind of like when Apple pushes a new iOS update on you and you decide whether to download it. So was this like a vote. It's not a formal vote now, but you could think of it like the people who adopt the new software or voting yes, and the people who keep using the old software or voting no. And as long as enough computers adopt the update with lads changes, Ethereum will have effectively moved on to the new system.

And what happens if that fails, If not enough people adopt the new system, well, it would basically give birth to a new version of Ethereum. So there would be the Ethereum based off of the old software and the Ethereum based off the new software. That kind of split has happened to Bitcoin and to Ethereum before it gets really messy, though, and Vlad wants to avoid that at all costs. Yeah, okay, so I think I understand enough

to know that that is a bad outcome. And a lot is writing on Glad to convince everyone to take of changes. Yeah, yeah, for sure, and he knows that he knows the pressure he's under. But here's the thing. Even after three years, Casper is not ready. There's been delays, and the people who regularly use Ethereum are starting to get impatient. So what exactly Laddin Vitallic are trying to do in the world's first explanation of blockchain that won't put you to sleep? We promise that is coming up.

So Matt, what exactly is Casper trying to do? Okay, to understand it, we need to explain how the underlying technology works. This is the technology that we've been referring to as blockchain. Oh God, okay, I'm gonna prepare myself here. Okay, are you ready go for it? So imagine you want to send me a hundred bucks to thank me for being such a great guest host on DECRYPTI okay, I

can see where this is going now. Traditionally, what would happen is your bank would check your balance right to make sure you actually have that one hundred bucks to give me, right, But then if you were to give me a hundred dollars worth of bitcoin or ether, it works differently. So it's not a bank that checks anything or verifies that you have a hundred dollars to give. It's these other people in the community that perform the verification.

These are the people we call miners, okay, like gold miners, yeah kind of. I presume they're not wearing hard hats and carrying picks, So how how do they verify what they need to verify? The first thing to understand is how important the history of the ledger is here every transaction and a blockchain is recorded in time stand so when the network checks for your one bucks, there it is.

Miners are using these really powerful computers that do tons and tons of trial and error calculations, and the first one to get it right gets rewarded with bitcoin or ether or whatever other cryptocurrency you're working at. So think about it right now. That's a free seventeen tho dollars for one bitcoin right now. So there's a lot of money here at stake. And this is how all cryptocurrencies work. Yeah,

basically except for a few very minor ones. But you know, it's also a process that's led to a lot of problems like what, well, it's become expensive to be a miner. You're competing against everyone else to be the first to crack, you know the problem. That means you have to invest in really powerful computers to run these calculations. You need to pay for a lot of electricity to run those computers.

That all means that it's mostly big companies and big groups of miners that have all banded together who are dominating the mining of these cryptocurrencies. And there's been a lot of talk recently about all the electricity that these miners are wasting to perform these calculations. Yeah, I don't know if they would say it's wasting, but it's a

lot of usage. So like a recent report estimated that the electricity used to mind the world's bitcoin is equal to the electricity used by Ecuador in an entire year. And Ecuador is a country with sixteen million people. That is absolutely crazy, particularly now when you know C two emissions and global warming have become such a big problem. Yep, there's another problem too. You know, when you're relying on this time consuming trial and error process to verify transactions,

it also means you have a pretty slow network. Okay, how slow are we talking about? At the conference, I spoke to someone named Andrew Keys. He works for an ethereum startup in Brooklyn called Consensus, and he compared it to credit card transactions. American Express, Visa, master Card all average around thirty thousand transactions per second. But if you compare that with etherium, the public ethereum main net average

it about seven. So if Ethereum can process seven transactions per second and there's demand for a hundred, what happens, Well, you get a backlog Uh, there's transactions that are just waiting to get verified, which leads to long delays. That's exactly what's happening now. Recently, it's gotten really bad to some transactions have taken as long as twenty minutes and glad you know he's out there saying, Hey, my proposal is going to fix this, good old Lad. Okay, so

what would lads changes actually do. Here's the gist. In the current system, miners are the ones who verify transactions, but Lad and Metallic wanted to move that responsibility to these people that they're calling stakeholders stakeholders. Okay, the metaphors aren't quite consistent, but tell us who are the stakeholders? Okay, A stakeholder is anyone who owns ether. That's the currency remember for ethereum. Here's the catch. You have to lock it up and like an escrow account or for a

short period of time. It's sort of like in a security deposit box. And as they're working on verifying other people's transactions, they get rewarded if they verify legitimate trades. Uh, if they verify bad ones, or if they try to mess with the system, they can lose those security deposits. Okay, so I get it. It's against their interest to try

to do anything bad exactly. And in this new system to verify transactions, um, you don't need an army of computers to be running those energy consuming, time consuming trial and error calculations. The verifications here would happen much faster, so the network would be able to take on a lot more volume. It would also be more energy efficient

and less expensive. Proponents hope that would have the benefits of allowing more people, ordinary people to earn more Ether and also keep the cryptocurrency from getting concentrated in the hands of just a few rich people and those mining groups that we've been talking about. Yeah, but Matt, it does sound like this is a system that benefits people who already own a ton of Ether, these so called stakeholders. Wouldn't they just go on to earn more. Yeah, that's

definitely an argument against it. But they also feel that think about the barrier to entry of mining. You have to have all the equipment, you have to know what you're doing here, you just have to own the currency, which is a lot easier to get into it. So they hope that it kind of democratizes it So remember how I told you earlier that people are getting anty for this upgrade. They're getting so anty now that Vitalic is pushing another version of Casper, another version, so there's

Casper two point. Oh yeah, they're not necessarily competing proposals though, Laden Vitalic on good terms, and Thetalic plan is more like a stop gap aragement for Ethereum developers as they wait for lads more permanent fix to be ready. Why it definitely has his own ideas that he wants to fully flesh out, whereas I'm more concerned about let's get something out there and now because they know people are

demanding some kind of crocustique to be out there. When the talent created Ethereum, in from the very beginning, he intended it to be so much more than Bitcoin, so much more than a network that powers just another currency. Like what all right, you remember crypto Kitties from a few weeks ago. That's exactly what happened to the Ethereum network this week, an application called crypto Kities clogged the entire network. Crypto Kitties is a great example of an

application that's built on the Ethereum network, and it's a game, right, Yeah. Essentially, so you purchased these virtual cats and they have their own unique digital DNA. You can breed them, and you can collect more war cats and sell those cats to other people. It's kind of like Beanie babies, remember, but if beanie babies could have their own babies. But it's not just that the payments in this game happen in Ether. The blockchain technology is keeping a record of the exact

kind of cats everyone owns. So when it comes time to sell your aqua marine kitty, it verifies that you actually have an Aqua marine kitty. And I know you have one, brat I have two of them, so you know. Basically this is all being based on Ethereum, and it keeps track of how much Ether is going in and out, and cats are why lad has been working so hard on this. Let me give you a less weird example. So the other week I bought a record on the Ethereum blockchain. I had to pay for it with Ether.

It was about ten bucks, and I spent and I went directly to the artists who wrote the music, so there was no record company in the middle, no music busher taking a cut. My ten bucks was split up exactly as the band wanted it to be. So maybe five bucks went to the singer, three bucks to the guitarists, that kind of thing. So it's cutting out the middleman exactly, and it's making it possible to do all of this

in an automated way. So imagine how it would have implications for all these other kinds of services that connect people who need each other, like how Uber makes it possible for a rider to get a car and a driver, or how Airbnb makes it possible for a traveler to find a room at someone's apartment. If it's all automated, if it's all code, all of these services would be a lot cheaper for consumers. There's a picture that I love to show people about Apple's evolution because because I'm

I'm always trying to basically parallel this way. Three point oh two Web two point oh. This is Andrew Keys, the Ethereum startup guy who I met at the conference. He pulled up a chart on his phone that showed the growth in the number of iOS apps, and it starts out in two thousand seven where there were zero, and then in two thousand and eight there were hundred. Then there were a thousand up to two eighteen, where they were a billion. So Andrew thinks there will be

a lot more Crypto Kitties in the future. Yeah, but only if the Ethereum network gets the upgrade it needs, the kind of upgrade that lads working on. When people rushed into the Crypto Kitties game, those Crypto Kitty users made up of all Ethereum transactions. And that's all for a relatively simple game about collectible cats. Yeah, so imagine how much worse it would be to run a huge,

complicated business like Uber or eBay on Ethereum. Okay, so the Ethereum developers have some big dreams for where this technology could go, but they can't do any of it unless they can increase the number of transactions happening at a time, and that means it's all up to Casper. So what's the timeline for its rollout? I asked Metalic about this uh and his temporary kind of stop gap measure, and he said he was aiming for the end of the year. This was in early November and there aren't

many days left in the year. And I haven't heard anything yet about it being rolled out. And what about Vlad and his big overhaul, so he said was very likely, though he doesn't have a hard deadline at this point. I see, but once Casper has been rolled out, can we expect Ethereum to start really going mainstream. That's certainly the hope, although Vlad was cautious when I asked him that same question about how long it would take to

bring Ethereum to the masses. He said, you know, even beyond Casper, Ethereum developers still have a lot more work to do. And that's it for this week's episode of Decrypted. Thanks for listening. Hey, do you use Ethereum and have a story to share, Send us an email at Decrypted at Bloomberg dot net, or you can reach out to us on Twitter. I'm at Matt Licening and I'm at

brad Stone. If you haven't already, please subscribe to our show wherever you get your podcasts, and while you're there, I hope you'll take a minute to leave us a rating and a review. It does so much to get us in front of more listeners. This episode was produced by Pierre Gadkari, Liz Smith, and Magnus Henrikson. Fancesca Levi is the head of Bloomberg Podcasts. We'll see you next week.